Tuesday, 13 December 2011

The worst possible outcome? NG v. SG

Some judges seem to specialise in judgments which are easy to read and especially useful to practitioners. Mostyn J is one of those. His latest publication (NG v. SG [2011] EWHC 3270 (Fam)) is all about a husband who allegedly failed to tell the truth about his assets. As a result, the District Judge who heard his application to reduce the maintenance he had to pay for his former wife and children, dealt with it in a way which led to an expensive appeal to the high court. The DJ had to decide whether the Husband had indeed suffered the radical reduction in his wealth which he claimed and Mostyn comments, "There can be no doubt that the course of the case was made difficult by a combination of bloody-mindedness and incompetence by H in the presentation of his financial affairs."  It seems, though, that his bloody-mindedness led to a poor judgment by the Court.

What the DJ did was order a capitalisation of maintenance at just short of £1m, which the Husband said amounted to all his remaining wealth. He found that "H was a serious and serial non-discloser" and drew adverse inferences about the true level of his wealth, as opposed to what he said that it now was. From having sold his business in 2002 for £6.7m, the Husband reckoned that he was now entirely out of money, having made an ill judged loan to a company and otherwise having spent the rest. Not bad going in just seven years! The DJ simply didn't believe him and ordered him to pay the balance of the maintenance in a single lump sum instead of over the rest of expected term.

It's an interesting tale in itself but for the family lawyer it contains a wealth of helpful material. It turns out to be a case study in how not to deal with a complicated case. Mostyn J explains just how the judge should have approached the exercise and why it went wrong. The sting in the tail is that the order was set aside and the case sent back to the lower court for the whole thing to be done again!

  • A case which started life in February 2010 has to go back almost to its start and will have taken doubtless more than two years to conclude.
  • The Husband stopped paying maintenance in February 2009, so his former wife has had to foot two years of legal bills without contribution from him.
  • The Husband says that he has now run out of money and has had to conduct his own appeal hearing, albeit successfully.
  • Both parties now face another contentious court hearing before they know where they stand.
So how has Mostyn helped lawyers? Well, by summarising the process that a court should follow. If you know how the court should set about its task, you should be able to structure your client's evidence and arguments. And how should a court do its job where one party says the other has hidden assets? Mostyn sets out an 8 stage system.

  1. First it decides whether there are actually hidden assets, if necessary by drawing adverse inferences. If a party's life style simply cannot be financed from the declared means and there isn't a corresponding debt, the only sensible inference is that there's other money somewhere else, for example.
  2. But any inferences must be reasonable. There has to be a reason to believe that there is other money. Simply not believing one party is not enough on its own.
  3. If the court reasonably decides that there are hidden assets, the court must then do its best to quantify just how much is hidden away.
  4. First of all, the court will look at any direct evidence, such as documents or things which the other party has been able to observe.
  5. Next, the court will look at the non disclosing party's life style and business activities.
  6. Vague rumours of someone having more money than he claims is just not enough.
  7. It is possible to use a rule of thumb that someone who has failed to disclose has at least twice as much as the other party is asking for but this should not be the only measure of what he/she has.
  8. Where the court has decided that one party has failed to disclose assets, it is better for the court to risk being unfair to that person than the other. In other words, the court will be generous to the innocent party at the risk of ordering the non discloser to pay more than is justified.
The unpleasant reality in this case is that if one party is foolishly extravagant in his lifestyle, as seems may well have been the case here, or takes bad investment decisions, it's both of the parties who will suffer as a result.

1 comment:

  1. Good piece well written.
    When during the course of a dinner at my Inn I asked a Barrister what good my Maths Degree be in law, he said you may wish to try your luck in family... I had little time then to pursue it but I can see why that may be true
    First writing ever I read on family law but enjoyed it.